Equity Ratings Changes: Thursday

By Andrea Tryphonides

As we head towards the month’s and the quarter’s end, there seems to be some frustration in the air. Equity markets have been virtually crab-like, shifting a few points up, a few points down for most of March.

Investors are wrestling with conflicting data on the global economy and as yet, there has been no catalyst to take Europe’s key indexes above key technical levels.

In the meantime, there are plenty of equity ratings changes to keep investors occupied. Here are our top picks for Thursday:

• Exane BNP Paribas has turned its attention to the steel sector and has warned that carbon steel faces several headwinds. In a nutshell, the brokerage said the risk/reward of the European steel sector is unappealing. It has downgraded ThyssenKrupp to underperform from neutral on lower cash-flow generation ahead, and on relative valuation metrics.

It has upgraded Voestalpine to outperform from neutral as it has the most resilient earnings profile and a relatively undemanding valuation. The analyst has also upgraded ArcelorMittal to neutral from underperform on valuation grounds and its increased focus on debt reduction.

• Sticking with the resources sector, UBS has downgraded Kazakhmys to sell from buy following the company’s results, released on March 27. The brokerage is also taking into account UBS commodity price changes, largely to do with lower gold and silver prices. UBS expects Kazakhmys’s earnings per share (EPS) to suffer in 2012-2015 from lower copper prices and higher costs. Similarly, Petropavlovsk is downgraded to neutral from buy on lower gold forecasts. UBS has lowered Petropavlovsk’s 2012-2014 EPS forecasts by around 50%-65%, again on lower prices and higher costs.

• Credit Suisse has upgraded Suez Environnement to outperform from neutral. The brokerage has increased its earnings estimates on Suez Environnement by close to 10% in each of the next two years following a strong end to full-year 2011 and the revision to Credit Suisse’s euro-area gross domestic growth forecasts for 2012 to 0% from a 0.5% decline.

• From resources to something much more refined, Deutsche Bank has downgraded luxury retailer Salvatore Ferragamo to hold from buy following a 58% rise in its share price year to date. Deutsche Bank remains positive on the Ferragamo story, but for now, says the current valuation seems to reflect correctly the turnaround potential of the group.

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